Chinese smartphone Factory collectively against Broadcom acquisition of Qualcomm

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According to foreign reports, China's two major smartphone makers OPPO and vivo on Tuesday expressed opposition to the acquisition of Qualcomm Broadcom transactions. They fear that the deal will not only hurt the company's profit margins, but also hurt their interests because of the large global competitors.

At present, revenues from OPPO and vivo account for more than 10% of Qualcomm's $ 22 billion annual revenue. The executives of the two companies said they are concerned that if Broadcom's $ 105 billion hostile takeover of Qualcomm transactions succeeds, this will not only trigger product price increases, but also bring about some other changes. Xiaomi, another Chinese smartphone maker, said the company had reservations about the M & A deal. Broadcom and Qualcomm merged to form the world's third-largest chip maker.

Of course, Broadcom acquisition of Qualcomm transactions can not be completed within a few months. Broadcom announced in November last year that the company has submitted a tender offer to Qualcomm. Broadcom proposed the acquisition of Qualcomm by cash and stock. If the deal is approved, it will be the largest M & A deal in the history of technology. However, Qualcomm officially rejected the $ 103 billion tender offer made by Broadcom on November 13. Paul Jacobs, chairman of Qualcomm's board of directors, said: "The board of directors agreed that Broadcom's proposal clearly underestimated Qualcomm's leadership in mobile technology and future prospects." Broadcom this week announced the start of a letter to Qualcomm shareholders, Hope that in March this year, Qualcomm shareholders' meeting, Qualcomm replaced the existing members of the board by voting.

Even though Qualcomm accepted Broadcom's takeover offer, the transaction still needs to be evaluated through multinational antitrust investigations and regulations. The collective opposition from China's major smartphone makers may make it difficult for Broadcom to obtain the approval of China's antitrust regulators.

According to market research firm Kantar Worldpanel ComTech, about one-third of smartphone users in China use OPPO, vivo or millet devices. The company's data also show that Apple's share of the Chinese city smartphone market is about 24%. Data provided by IDC, another market research firm, shows that the number of smart phone chips supplied by Qualcomm to OPPO, vivo and Xiaomi is more than double the number of chips supplied to Apple.

According to sources, Broadcom and Qualcomm executives have been talking to clients about the pros and cons of acquisitions in recent weeks. Hock Tan, Broadcom's chief executive, said the company has been in contact with many Qualcomm customers, including some Chinese customers. "They are very supportive of the deal," Chen said in a statement to the Wall Street Journal.

"We listened to the opinions of many of the largest customers around the world, especially Chinese customers, who are concerned about Broadcom's acquisition of Qualcomm," a Qualcomm spokesman said.

Chen Fuyang visited China in December last year and held talks with some clients. According to a company employee interviewed by Chen Fuyang, Chen Fuyang paid a very low profile visit and rode a worn-out toyota while visiting the company. The source said Chen Fuyang in the one-hour talks that Qualcomm shareholders are very dissatisfied with the company's current management, Broadcom believes that after taking over Qualcomm can significantly reduce the latter's operating expenses.

According to millet, oppo and vivo executives interviewed by The Wall Street Journal, they are not only worried that Broadcom will raise the selling price of mobile chips after the acquisition of Qualcomm is completed, but also that Broadcom will cut its Qualcomm R & D expenditures significantly from This may be detrimental to them in the long run. It is because of high investment go through R & D high, so that the company and customers in the new mobile technology has made the lead. However, in the development of 5G technology, Qualcomm is currently outdated.

In November last year, millet, OPPO and vivo signed an unfettered agreement with Qualcomm to purchase Qualcomm's $ 12 billion worth of accessories in the next few years. The company said that if Qualcomm was acquired by Broadcom, they may use chips from other vendors. Although the above companies are also Broadcom customers, but revenue brought Broadcom did not bring Qualcomm's income and more.

Of course, Qualcomm currently has legal litigation disputes with many clients and disputes with regulatory authorities in many countries. These disputes stem from Qualcomm's business model: The company not only sells mobile chips to customers but also royalties from them. It also led to the appearance of Qualcomm's unfair use of the criticism of its market dominance. Apple is currently playing litigation with Qualcomm in the world, and since early 2017 Apple foundry manufacturers have stopped paying royalties to Qualcomm.

Qualcomm settled a massive fines of 975 million U.S. dollars in 2015 after it settled with China's Development and Reform Commission. As part of the settlement, Qualcomm reduced royalties charged to Chinese mobile device makers.

At a recent visit to mainland China, Chen Fuyang said at a conference that he hoped to adjust the current royalties agreement of Qualcomm if the acquisition of Qualcomm was approved. After adjustment, the customer will pay a higher chip fee, but the royalties will be reduced accordingly. According to one smart phone executive who attended the conference, "He believes we support this idea because it can quickly reduce costs, but we do not think so." The executives said that China's smart phone manufacturers are more concerned about If the deal is approved, they will not be able to compete with their international competitors in the long run.